MAERSK GLOBAL SERVICE CENTRE INDIA P.LTD, MUMBAI V. ASST CIT 15(2)(2), MUMBAI

ITA 6394/MUM/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5798 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 31-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A MOHAN
• Keywords: Transfer pricing; International transaction; Initiation of penalty proceedings
• Section: 143(3); 92D; 234B; 139(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J, BENCH MUM BAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM ITA NO. 6394/MUM/2017 ( ASSESSMENT YEAR: 2013-14) MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD. , 3 RD , 4 TH & 5 TH FLOOR, PRUDENTIAL BUILDING CENTRAL AVENUE ROAD, HIRANANDANI BUSINESS PARK, POWAI, MUMBAI-400076. VS. A.C.I.T.-15(2)(2), ROOM NO. 357, 3 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. PAN/GIR NO. AADCM 7786 M (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI PORUS KAKA (AR) REVENUE BY SHRI A. MOHAN (CIT-DR) DATE OF HEARING 09/01/2020 DATE OF PRONOUNCEMENT 05/ 02/2020 O R D E R PER PAWAN SINGH, JUDICIAL MEMBER; 1. THIS IS THE APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL-3, MUMBAI (IN SHORT, T HE DRP) DATED 31/05/2017 FOR THE A.Y. 2013-14 WHICH WAS GIVEN EFF ECT BY THE ORDER PASSED U/S 143(3) R.W.S 144C(13) OF THE INCOME TAX ACT, 1961 (IN SHORT, THE ACT), WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN : TRANSFER PRICING ADDITION TO TOTAL INCOME OF RS. 40 ,94,88,782/- MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 2 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED ASSESSING OFFICER ('AO') THE LEARNED TRANSF ER PRICING OFFICER ('TPO') ERRED AND THE HON'BLE DISPUTE RESOL UTION PANEL ('DRP') FURTHER ERRED IN MAKING AN ADDITION OF RS. 40,94,88,782/- TO THE APPELLANT'S TOTAL INCOME BASED ON THE PROVISION S OF CHAPTER X OF THE INCOME-TAX ACT,1961 ('THE ACT') FUNCTIONAL PROFILE OF THE APPELLANT 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO / TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN NOT APPRECIATING THAT THE APPELLANT IS MAINLY A LOW- EN D BACK OFFICE SUPPORT SERVICE PROVIDER, I.E. A LOW-END BUSINESS PROCESS O UTSOURCING ('BPO') SERVICE PROVIDER THEREBY IGNORING THE FINDINGS OF H ON'BLE INCOME TAX APPELLATE TRIBUNAL ('TRIBUNAL') - SPECIAL BENCH (I. T.A. NO.7466/MUM/2012) IN APPELLANT'S OWN CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE DRP ERRED IN NOT CONSIDERING THE OBSERVATIONS OF TH E HON'BLE TRIBUNAL-SPECIAL BENCH (I.T.A. NO.7466/MUM/2012) IN APPELLANT'S OWN CASE WHEREIN IT HAD STATED THAT THE PRINCIPAL F UNCTIONS PERFORMED BY THE APPELLANT SHOULD BE IDENTIFIED AND THE SAME SHOULD BE COMPARED WITH THE PRINCIPAL FUNCTIONS PERFORMED BY THE COMPARABLE COMPANIES SELECTED TO FIND OUT THE RELATIVELY EQUAL DEGREE OF COMPARABILITY IN ACCORDANCE WITH RULE 10B(3) OF THE INCOME-TAX RULES, 1962 ('THE RULES'). INCORRECT SELECTION OF COMPARABLES BY THE LEARNED T PO 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO / TPO ERRED AND HON'BLE DRP FURTHER ERRED IN UPH OLDING/CONFIRMING ACTION OF TPO IN SELECTION MPS LIMITED AS COMPARABL E. THE APPELLANT SUBMITS THE SAID COMPANY OUGHT NOT TO BE TAKEN AS C OMPARABLE. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED AO / TPO FURTHER ERRED IN NOT EVEN PROVIDING THE SEARCH PROCESS FOR SELECTION OF ADDITIONAL COMPARABLE COMPANY, AND THEREFORE, ANY S UCH SELECTION OF ADDITIONAL COMPARABLE WITHOUT FOLLOWING ANY METHODICAL PROCESS AMOUNTS TO CHERRY PICKING OF THE COMPARABLE BY THE LEARNED TPO. INCORRECT REJECTION OF APPELLANT'S BENCHMARKING ANA LYSIS AND COMPARABLES MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 3 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO / TPO ERRED AND HON'BLE DRP FURTHER ERRED IN UPHOLDIN G/CONFIRMING THE ACTION OF THE LEARNED AO/TPO OF DISREGARDING MOST OF THE COMPARABLE COMPANIES SELECTED BY THE APPELLANT I.E. ALLSEC TECHNOLOGIES LIMITED CALIBER POI BUSINESS SOLUTIONS LTD, CAMEO CORPORATE SERVICES LI MITED, COSMIC GLOBAL LIMITED, DATAMATICS FINANCIAL SERVICES LIMIT ED, IN HOUSE PRODUCTION LIMITED, INFORMED TECHNOLOGIES INDIA LIMITED, MICRO LAND LIMITED, R SYSTEM INTERNATIONAL LIMITED, SPANCO LIMITED AND SPARSH BP O SERVICES LIMITED BASED ON THE CONTEMPORANEOUS DATA IN THE TRANSFER P RICING STUDY REPORT MAINTAINED AS PER SECTION 92D OF THE ACT READ WITH RULE 10D OF THE RULES AND VARIOUS SUBMISSIONS MADE BY THE APPELLANT. YOUR APP ELLANT PRAYS THAT SUCH COMPANIES BE INCLUDED AS COMPARABLES. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO / TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN UPHO LDING / CONFIRMING THE ACTION OF THE LEARNED TPO IN REJECTING COMPANIES ME RELY ON THE BASIS OF DIFFERENT ACCOUNTING PERIOD DESPITE THE SAME BEING FUNCTIONALLY COMPARABLE. THE LEARNED AO / TPO ERRED AND THE HON'BLE DRP FURT HER ERRED IN NOT FOLLOWING THE PRINCIPLES LAID DOWN BY THE JURISDICT IONAL MUMBAI TRIBUNAL IN APPELLANT'S OWN CASE FOR AY 2010-11 (I.T.A. NO. 1082/MUM/2015), WHEREIN IT HAD HELD DIFFERENT ACCOUNTING YEAR END S HOULD NOT BE A SOLE REASON FOR REJECTION OF A FUNCTIONALLY COMPARABLE COMPANY. 7. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED AO / TPO ERRED AND HON'BLE DRP FURTHER ERRED IN APPLYI NG ADDITIONAL FILTER OF REJECTING COMPANIES WITH LESS THAN 75 PERCENT EA RNINGS FROM EXPORTS, WHICH IS UNWARRANTED IN THE COMPARABILITY ANALYSIS. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO / TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN NOT ACCEPTING THE APPELLANT'S FILTER OF REJECTING COMPANIES HAVING TU RNOVER OF LESS THAN INR 1 CRORE AND APPLYING ADDITIONAL LOWER TURNOVER FILTER OF 1/10TH TIMES OF THE TURNOVER OF THE ASSESSEE AND HIGHER TU RNOVER FILTER OF 10 TIMES THE TURNOVER OF THE ASSESSEE, WHICH IS UNWARR ANTED IN THE COMPARABILITY ANALYSIS. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED AO /TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN REJECTING COMPANIES WITH LOSSES / DIMINISHING REVENUE, WHICH IS UNWARRANTED IN THE COMPARABILITY ANALYSIS. MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 4 THE LEARNED AO / TPO ERRED AND THE HON'BLE DRP FURT HER ERRED IN NOT FOLLOWING THE PRINCIPLES LAID DOWN BY THE JURISDICT IONAL MUMBAI TRIBUNAL IN APPELLANT'S OWN CASE FOR AY 2009-10 (I. T.A. NO. 2594/MUM/2014), WHEREIN IT IS PRINCIPALLY HELD THAT FURTHER INVESTIGATION SHOULD BE MADE TO ASCERTAIN WHETHER L OSSES REFLECTS NORMAL BUSINESS CONDITIONS AND THE COMPANY SATISFIE S THE COMPARABILITY ASPECTS. ERRED IN USING SINGLE YEAR DATA FOR MARGIN COMPUTAT ION 10. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO / TPO ERRED AND HON'BLE DRP FURTHER ERRED IN NOT CONSIDERING THE REQUIREMENT OF PROVISO TO RULE 10B(4) OF THE RULES WHILE ANALYZING THE DATA FOR COMPARABILITY OF COMPANIES. RISK ADJUSTMENT DISALLOWED 11. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO / TPO ERRED AND HON'BLE DRP FURTHER ERRED IN UPH OLDING/CONFIRMING THE ACTION OF THE LEARNED AO/ TPO IN NOT ALLOWING R ISK ADJUSTMENT IN ACCORDANCE WITH THE RULES TO ACCOUNT FOR DIFFERENCE BETWEEN INTERNATIONAL TRANSACTIONS AND THE ALLEGED COMPARAB LE UNCONTROLLED TRANSACTIONS SELECTED BY THE LEARNED AO /TPO. DISALLOWANCE ON ACCOUNT OF DELAYED PAYMENT OF EMPLO YEE'S ESI CONTRIBUTION 12. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED AO ERRED IN DISALLOWING PAYMENTS MADE TOWARDS EMPLOYEE 'S ESIC CONTRIBUTION AGGREGATING TO RS. 478,028/- EVEN THOUGH THE SAME H AS BEEN PAID WITHIN DUE DATE OF FILING RETURN U/S 139(1) OF THE ACT. 13. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HON'BLE DRP ERRED IN NOT ADJUDICATING THE APPELLANT'S OBJECTION S AGAINST THE DISALLOWANCE OF PAYMENTS MADE TOWARDS EMPLOYEE'S ESIC CONTRIBUTI ON AGGREGATING TO RS. 478,028/- INITIATION OF PENALTY PROCEEDINGS 14. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO ERRED IN INITIATING PENALTY PROCEEDINGS UNDER SEC 2 71(1)(C) OF THE ACT. LEVY OF INCORRECT INTEREST UNDER SECTION 234B & 234C OF THE ACT MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 5 15. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED AO HAS ERRED IN COMPUTATION OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT. THE APPELLANT PRAYS THAT THE ADDITION MADE BY THE L EARNED AO / TPO BE DELETED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-COMPA NY IS ENGAGED IN THE BUSINESS OF PROVIDING CAPTIVE SUPPORT/ BACK OFFICE SUPPORT SERVICES TO ITS ASSOCIATED ENTERPRISES (AE). THE ASSESSEE-COMPANY F ILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2013-14 DECLARING TOTAL INCOME AT RS.72,80,85,640/-. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED REPORT UNDER FORM 3CEB. THE ASSESSEE REPO RTED INTERNATIONAL TRANSACTION WITH ITS AE FOR PROVIDING IT-ENABLED SE RVICES / DATE PROCESSING SERVICES AND BUSINESS PROCESSING OUTSOUR CING OF RS. 5210803840/-. CONSEQUENT UPON REPORTING INTERNATION AL TRANSACTION THE ASSESSING OFFICER MADE A REFERENCE TO TRANSFER PRIC ING OFFICER (TPO) FOR COMPUTATION OF ARMS LENGTHS PRICE OF THE SAID INTER NATIONAL TRANSACTION. THE ASSESSEE SELECTED TRANSACTION NET MARGIN METHOD (TNMM) AS MOST APPROPRIATE METHOD TO BENCH MARK PROVISION OF IT EN ABLED SERVICES/DATA PROCESSING/BUSINESS PROCESSING SERVICES. THE PROFIT LEVEL INDICATOR (PLI) SELECTED WAS OPERATING PROFIT/ TOTAL COST (OP/TC). THE ASSESSEE HAS SHOWN ITS MARGIN AT 14.52%. THE ASSESSEE SELECTED ITSELF AS TESTED PARTY. THE ASSESSEE BENCH MARKED ITS ALP UNDER TRANSACTION NET MARGIN METHOD MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 6 (TNMM),THE ASSESSEE SELECTED 12 COMPANY AS COMPARAB LE AND COMPUTED THE MARGIN IN THE FOLLOWING MANNER: SR.NO. NAME OF THE COMPARABLE COMPANY 1 ALLSEC TECHNOLOGIES LIMITED 2 CALIBER POINT BUSINESS SOLUTIONS LIMITED 3 CAMEO CORPORATE SERVICES LTD. 4 COSMIC GLOBAL LIMITED 5 DATAMATICS FINANCIAL SERVICES LIMITED 6 E4E HEALTHCARE BUSINESS SERVICES PRIVATE LTD. 7 IN HOUSE PRODUCTIONS LIMITED 8 INFORMED TECHNOLOGIES INDIA LIMITED 9 MICROLAND LIMITED 10 R SYSTEMS INTERNATIONAL LIMITED 11 SPANCO LIMITED 12 SPARSH BPO SERVICES LTD. 3. THE MARGIN ON COMPARABLE BASED ON AVERAGE OF WAS 4. 28% AND THE ASSESSEES MARGIN FOR INTERNATIONAL TRANSACTION WAS 14.45%. THUS, THE ASSESSEE CLAIMED ITS TRANSACTION AT THE ARMS LENGTH . DURING THE PROCEEDINGS BEFORE TOP, THE TPO ACCEPTED ONLY ONE C OMPARABLE I.E. E4E HEALTHCARE BUSINESS SERVICES PRIVATE LTD. AND INCLU DED IRIS BUSINESS SERVICES LTD. AND MPS LTD. MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 7 4. THE TPO AFTER INCLUDING 2 COMPARABLE WORKED OUT THE ARITHMETIC MEAN OF PROFIT LEVEL INDICATOR (PLI) OF 3 COMPARABLE COM PANY AND ARRIVED AT MARGIN OF 24.78 % AGAINST PLI OF ASSESSEE AT 14.45 % AS UNDER: SR. NO. NAME OF COMPARABLES NCP MARGIN (%) 1 E4E HEALTHCARE BUSINESS SERVICES PRIVATE LIMITED 17.36 2 IRIS BUSINESS SERVICE LIMITED 27.29 3 MPS LIMITED 29.71 ARITHMETIC MEAN 24.78 5. THE TPO WORKED OUT DIFFERENCE BETWEEN ALP OF SALES AND VALUE OF INTERNATIONAL TRANSACTION AND MADE ADJUSTMENT OF RS . 47,82,41,475/- IN THE FOLLOWING MANNER: DETAIL AMOUNT IN RS. INTERNATIONAL TRANSACTION (IT) OPERATING COST ARMS LENGTH PRICE & 124.78% ADJUSTMENT A B=A/112.17% C=B*124.78% 5210803840 4545452296 5796595374 585791534.5 IT X 1.03 IT X 0.97 5367127955 5054479725 THUS, THE ALP OF THE INTE3RNATIONAL TRANSACTION IS DETERMINED AT RS. 579,65,95,374/- LEADING TO AN ADJUSTMENT OF RS. 58, 57,91,534/-. IT IS SEEN THAT THE ASSESSEE HAS MADE SUO MOTTO ADJUSTMENT OF RS. 1 0,75,50,059/- ON ACCOUNT OF TRANSFER PRICING. ACCORDINGLY, THE NET ADJUSTMEN T WORKS OUT TO RS. 47,82,41,475/- 6. ON RECEIPT OF REPORT OF TPO, THE ASSESSING OFFICER MADE UPWARD ADJUSTMENT/ADDITION OF RS. 47,82,41,475/-. IN THE D RAFT ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 144C(1). THE ASS ESSEE FILED ITS OBJECTIONS BEFORE DRP. THE DRP AFTER CONSIDERING TH E OBJECTION OF ASSESSEE AFFIRMED THE REJECTION OF ASSESSEES COMPA RABLE AND FURTHER AFFIRMED THE INCLUSION OF COMPARABLE BY TPO. ON RE CEIPT OF DIRECTION OF MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 8 DRP DATED 31.05.2017, THE ASSESSING OFFICER PASSED THE FINAL ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S. 144C(13) DATED 28 .08.2017. FURTHER, AGGRIEVED BY THE DIRECTION OF DRP, THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE SUBMISSION OF LD. AUTHORIZED REPR ESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (D R) FOR THE REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE L D. AR OF THE ASSESSEE SUBMITS THAT HE HAS VERY LIMITED SUBMISSION. THE LD . AR SUBMITS THAT IF CALIBER POINT SOLUTIONS LTD. (CALIBER POINT) IS INC LUDED IN FINAL SET OF COMPARABLE AND MPS LIMITED IS EXCLUDED, THE ASSESSE ES MARGIN WOULD BE WITHIN TOLERANCE RANGE AND THAT THE ASSESSEE WOU LD NOT PRESSED ANY OTHER GROUNDS OF APPEAL. THE LD. AR FURTHER SUBMITS THAT CALIBER POINT IS FUNCTIONALLY COMPARABLE WITH ASSESSEE. THIS FACT HA S BEEN ACCEPTED BY LD. DRP IN ITS DIRECTION FOR A.Y. 2013-14 AND 2012-13 A S WELL AS BY TRIBUNAL FOR A.Y. 2012-13. THE LD. AR OF THE ASSESSEE FURNIS HED THE COPY OF DIRECTION OF DRP FOR A.Y. 2012-13 & 2013-14 AND COP Y OF DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2009-10, 2 010-11 & 2012-13. THE LD. AR FURTHER SUBMITS THAT THE HONBLE BOMBAY HIGH COURT IN PTC SOFTWARE (395 ITR 176 BOM.) HELD THAT A DIFFERENT Y EAR ENDING CANNOT BE A MERE REJECTION OF COMPARABLE, WHICH IS OTHERWISE FUNCTIONALLY COMPARABLE. MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 9 8. FOR EXCLUSION OF MPS LIMITED, THE LD. AR OF THE ASS ESSEE SUBMITS THAT THIS COMPARABLE COMPANY IS ENGAGED IN BUSINESS OF S OFTWARE DEVELOPMENT AND PROVIDING TECHNOLOGY SOLUTION FOR PUBLISHING IN DUSTRY. MPS LIMITED IS PROFESSIONAL EXPERTISE, HAVING CALIBER PROFESSIO NAL EMPLOYEE WHO HAVE UNDERTAKEN VARIOUS RESEARCH AND DEVELOPMENT INITIAT IVES TO DEVELOP END TO- END CLOUD BASED PUBLISHING PLATFORM AND SOLUTIO NS. THIS COMPARABLE WAS REJECTED BY TPO IN A.Y. 2014-15 AFTER CONSIDERI NG THE SUBMISSION/OBJECTION OF ASSESSEE IN ITS ORDER DATED 09.05.2017. THE LD. AR SUBMITS THAT HONBLE BOMBAY HIGH COURT IN PCIT V S. J.P. MORGAN SERVICES LTD. (ITA NO.4/2017 & 170 OF 2017) AND IN CIT VS. LOREAL INDIA PVT. LTD. (ITA NO. 1046/2012) AND MUMBAI TRIB UNAL IN ASSESSEES OWN CASE FOR A.Y. 2005-06 HELD THAT SOFTWARE DEVELO PMENT COMPANY CANNOT BE COMPARE WITH LOW AND BACK OFFICE SERVICE PROVIDER. THE LD. AR FURTHER SUBMITS THAT PRODUCT PORTFOLIO OF THIS COMP ARABLE IS ALSO PLACED ON RECORD AS PER PAGE 2 OF PB II. 9. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE FOR E XCLUSION OF CALIBER AND AGAINST THE EXCLUSION OF MPS LIMITED RELIED UPON TH E ORDER OF TPO/DRP. THE LD. DR FOR THE REVENUE SUBMITS THAT TPO AS WELL AS LD. DRP HAS GIVEN DETAILED REASONING WHILE EXCLUDING AND INCLUD ING THE COMPARABLES. 10. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE T HAT ASSESSEE IS LOW END MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 10 SUPPORT SERVICES PROVIDER TO ITS AE. THIS FACT IS D ULY ACCEPTED BY TPO WHILE BENCHMARKING THE INTERNATIONAL TRANSACTION. S O FAR AS INCLUSION OF CALIBER POINT IS CONCERNED, WE HAVE NOTED THAT IN A SSESSEES OWN CASE FOR A.Y. 2012-13 THIS COMPARABLE WAS REJECTED BY TPO AN D AFFIRMED BY DRP. HOWEVER, ON APPEAL BEFORE THE TRIBUNAL, THIS C OMPARABLE WAS DIRECTED TO BE INCLUDED BY TRIBUNAL VIDE ITS ORDER DATED 20.11.2018 IN ITA NO. 653/MUM/2017 BY PASSING THE FOLLOWING ORDER : IV) CALIBER POINT SOLUTION LTD. 20. THIS COMPARABLE WAS PROPOSED BY THE ASSESSEE. H OWEVER, THE TRANSFER PRICING OFFICER REJECTED IT ON THE GROUND THAT THE ACCOUNTING PERIOD OF THE COMPANY ENDS IN DECEMBER, WHEREAS, ASSESSEE'S ACCOU NTING PERIOD ENDS IN MARCH. 21. THE DRP HAS ALSO UPHELD THE REJECTION OF THE CO MPANY AS A COMPARABLE FOR THE VERY SAME REASON. 22. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D MATERIALS ON RECORD. AS COULD BE SEEN FROM THE OBSERVATIONS OF THE DRP, THE FACT THAT THE COMPANY IS OTHERWISE FUNCTIONALLY SIMILAR TO THE ASSESSEE H AS BEEN ACCEPTED BY THE DRP. HOWEVER, THE DRP HAS UPHELD THE REJECTION OF T HE COMPANY ON THE GROUND OF DIFFERENT ACCOUNTING PERIOD ON THE REASON ING THAT WHEN SUBSTANTIAL COMPARABLES HAVING SAME ACCOUNTING PERIOD AS THE AS SESSEE ARE AVAILABLE THERE IS NO NEED TO CONSIDER A COMPARABLE HAVING DI FFERENT ACCOUNTING PERIOD. WE DO NOT FIND SUBSTANCE IN THE AFORESAID REASONING OF THE DRP. AS COULD BE SEEN FROM THE MATERIAL ON RECORD AS WELL AS WHILE C ONSIDERING SIMILAR ISSUE ARISING IN RESPECT OF COMPARABILITY OF R. SYSTEM IN TERNATIONAL LTD., THIS COMPANY WAS TREATED AS COMPARABLE TO THE ASSESSEE I N ASSESSMENT YEARS 2009- 10, 2010-11 AND 2011-12 BY THE TRIBUNAL IN THE ORDE RS REFERRED TO ABOVE NOTWITHSTANDING THE FACT THAT IT HAS A DIFFERENT AC COUNTING PERIOD. THAT BEING THE CASE, FOLLOWING THE CONSISTENT VIEW OF THE TRIB UNAL, WE DIRECT THE ASSESSING OFFICER TO TREAT THIS COMPANY AS A COMPAR ABLE. 11. CONSIDERING THE DECISION OF CO-ORDINATE BENCH, WHE REIN NO VARIATION OF FACT FOR THIS YEAR IS BROUGHT TO OUR NOTICE, THEREF ORE, RESPECTFULLY FOLLOWING MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 11 THE SAME, WE DIRECT THE AO TO EXCLUDE CALIBER POINT FROM FINAL SET OF COMPARABLE. 12. MPS LIMITED. THIS COMPARABLE WAS INCLUDED BY TPO W HILE MAKING BENCHMARKING. THE ASSESSEE OBJECTED FOR INCLUSION O F THIS COMPARABLE ON THE GROUND THAT MPS LIMITED IS ENGAGED IN BUSINESS OF PROVIDING PUBLISHING SOLUTION, TYPESETTING AND DATA DIGITIZAT ION AND IN WIDE VARIETY OF SERVICES INCLUDING DATA CODING, CONVERSION, INDE XING, EDITING, COPY EDITING, EDITORIAL SERVICES, SOFTWARE DEVELOPMENT, MAINTENANCE AND SUPPORT SERVICES. HOWEVER, THE TPO REJECTED THE OBJ ECTION OF ASSESSEE BY TAKING VIEW THAT AFTER GOING THROUGH THE ANNUAL REP ORT OF THIS COMPARABLE, IT WAS NOTED THAT THIS COMPARABLE IS FUNCTIONALLY C OMPARABLE WITH THE ASSESSEE. THE LD. DRP AFFIRMED THE ACTION OF ASSESS EE HELD THAT CLAUSE- 28(I) OF NOTES FORMING PART OF FINAL STATEMENT OF T HIS COMPARABLE SHOW THAT THIS COMPANY OPERATES IN ONE BUSINESS SEGMENT OF PROVIDING PUBLISHING SOLUTION VIZ., TYPESETTING AND DATA DIGI TIZATION SERVICES AND IS CONSIDERED TO CONSTITUTE A SINGLE SEGMENT. BUSINESS ACTIVITY OF THIS COMPARABLE IS PRIMARILY LOW END ITES. THE LD. DRP F URTHER HELD THAT ASSESSEE BEING AN ITES IS IN BETWEEN HIGH END BPO A ND LOW END BPO I.E. ITES PROVIDER AND BROADLY FUNCTIONALLY COMPARABLE W ITH ASSESSEE. THE LD. AR OF THE ASSESSEE STRONGLY RELIED UPON THE ANNUAL REPORT SHOWING THE PRODUCT PORTFOLIO OF MPS LIMITED. WE HAVE NOTED THA T THIS COMPARABLE MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 12 COMPANY WHILE REPORTING REVENUE RECOGNITION HAS SHO WN REVENUES FROM WEBSITE DESIGN AND DEVELOPMENT. FURTHER, ON PERUSAL OF ITS FUNCTION AS SHOWN ON PAGE II OF ITS ANNUAL REPORT, THIS COMPARA BLE HAS SHOWN TO HAVE ENGAGED IN SMART CLOUD BASED DIGITAL PUBLIC PLATFOR M AND ENGAGED IN MULTIFARIOUS ACTIVITIES. 13. THE LD. AR OF THE ASSESSEE VEHEMENTLY SUBMITTED THA T MPS LIMITED WAS REJECTED/DROP BY TPO FROM FINAL SET OF COMPARABLE I N A.Y. 2014-15. PERUSAL OF TPO ORDER UNDER SECTION 92CA(3) DATED 27 .10.2017 FOR A.Y. 2014-15, COPY OF WHICH IS PLACED ON RECORD. PERUSAL OF THE ORDER OF TPO FOR AY 2014-15, REVEALS THAT NO SHOW-CAUSE NOTICE W AS ISSUED BY TPO FOR INCLUSION OF THIS COMPARABLE. THE TPO ISSUED SH OW-CAUSE FOR INCLUSION OF ECLERX, BNR UDYOG LIMITED AND CROSSDOM AIN SOLUTIONS PVT. LTD. THUS, THE SUBMISSION OF LD. AR OF THE ASS ESSEE IS DEVOID OF MERIT. 14. SO FAR AS COMPARABILITY OF THIS COMPARABLE ON OTHER ASPECT IS CONCERNED. THIS COMPARABLE COMPANY IS IN THE BUSINESS OF PROVI DING PUBLISHING SOLUTION AND DATA DIGITIZATION. PROVIDING VARIETY O F SERVICES INCLUDING DATA CODING, CONVERSION, INDEXING, EDITORIAL SERVICES AN D SOFTWARE DEVELOPMENT. THIS COMPARABLE IS IN A DIFFERENT MODE L OF BUSINESS AND CANNOT BE COMPARED WITH ASSESSEE COMPANY. WE HAVE F URTHER NOTED THAT COORDINATE BENCH OF MUMBAI TRIBUNAL IN EMERSION ELE CTRIC COMPANY VS MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 13 ACIT (ITA NO. 531 & 6098/MUM/2018) DATED 14.06.2019, WHILE EXAMINING THE COMPARABILITY OF MPS LIMITED, WITH TH AT ASSESSEE WHICH PROVIDES IT SERVICES INCLUDING DATABASE ADMINISTRAT ION AND HELP DESK SUPPORT TO VARIOUS MEMBERS OF THE EMERSON GROUP, EX CLUDED THIS COMPARABLE HOLDING AS UNDER; 9.1 EXCLUSION OF MPS LIMITED WE FIND FROM THE ANNUAL REPORT OF MPS LTD., FOR THE YEAR ENDING 31/03/2014, THE SAID COMPARABLE PROVIDES END TO END PRINT AND DIGITAL PUBLISHING SOLUTIONS TO ITS PARTNERS ACROSS THE ENT IRE VALUE CHAIN FROM CONTAINED PROVISION, ENHANCEMENT AND TRANSFORMATION TO DELIVERY AND CUSTOMER SUPPORT, MAKING IT A TRUSTED PARTNER TO TH E BIGGEST PUBLISHERS IN THE WORLD. THE DIRECTOR'S REPORT UNDER THE HEADING 'MANAGEMENT DISCUSSION AND ANALYSIS' REFLECT THAT MPS LTD., HAS DEVELOPED END TO END CLOUD BASED PUBLISHING PLATFORM, MPS DIGICORE, WHIC H ADDRESSES THE NEED FOR AN INTEGRATED WORK FLOW THAT PUBLISHERS HAVE ST ARTED TO ASK FOR. AS SUCH, MPS LTD., HAS A FIRST MOVER ADVANTAGE IN EXPLOITING THE MARKET AND ESTABLISHING IT AS A PREMIER TECHNOLOGY SOLUTIONS P ROVIDER FOR PUBLISHERS. THE SAME MARKET FORCES HAVE ALSO CREATED IMMENSE OP PORTUNITIES FOR MPS DIGITRAK, THE PRODUCTION TARGETING SYSTEM DEVELOPED BY MPS LTD., AND MPS DIGICAMP, AUTOMATED COMPOSITION. SIMILAR OTHER SOLUTIONS ARE BEING DEVELOPED AT MPS LTD., AS RESEARCH AND DEVELOPMENT (R&D) CONTINUES BASED ON THE MARKET REQUIREMENT. THE ASSESSEE STATE D BEFORE THE LD. TPO THAT MPS LTD., IS FUNCTIONALLY NOT COMPARABLE BY ST ATING VARIOUS FUNCTIONS PERFORMED BY MPS LTD., AS UNDER: ( A ) AS PER THE CORPORATE INFORMATION DISCLOSED IN THE F INANCIAL STATEMENTS FOR THE YEAR ENDING 31/03/2013, MPS LTD. , THE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING PUBLISHING SOLUTIONS VIZ., TYPESETTING AND DATA DIGITIZATION SERVICES FOR OVER SEAS PUBLISHERS. THE COMPANY HAS A 100% EXPORT ORIENTED UNIT IN BENG ALURU, AND UNITS REGISTERED UNDER THE SOFTWARE TECHNOLOGY PARK OF INDIA (STPL) SCHEME THAT ARE LOCATED IN CHENNAI, DELHI, G URGAON AND DEHRADUN. THE COMPANY ALSO OPERATES THROUGH ITS BRA NCH IN UNITED STATES OF AMERICA. THE COMPANY PROVIDES PUBL ISHING SERVICES RELATING TO TYPESETTING OF BOOKS AND JOURN ALS, COMPOSING OF YELLOW PAGE ADVERTISEMENTS AND CATALOGUES, DATA CODING, MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 14 CONVERSION, INDEXING, EDITING, COPY EDITING, EDITOR IAL SERVICES, SOFTWARE DEVELOPMENT, MAINTENANCE AND SUPPORT TO GL OBAL PUBLISHERS. ( B ) MPS LTD. IS ENGAGED IN DEVELOPING OF SOFTWARE PROJE CTS SUCH AS DIGICORE AND DIGITRAK. ( C ) MPS LTD. HAS INCURRED OUTSOURCING COSTS WHICH INDIC ATE THAT IT FOLLOWS DIFFERENT BUSINESS MODEL. ( D ) FROM THE ANNUAL REPORT OF THE SAID COMPARABLE IT IS NOTED AS UNDER: 'MPS LTD, PROVIDES CONTENT CREATION PRODUCTION, TRA NSFORMATION AND TECHNOLOGY SERVICES TO GLOBAL ACADEMIC, SCIENTI FIC AND EDUCATIONAL PUBLISHERS. THE COMPANY HAS A TEAM OF M ORE THAN 2,860 EMPLOYEES BASED IN OFFICES IN BENGALURU, CHEN NAI, GURGAON, NOIDA AND DEHRADUN IN INDIA AND AT PORTLAND, OREGON , ORLANDO, FLORIDA, DURHAM, NORTH CAROLINA AND EFFINGHAM, ITTI NOS IN THE UNITED STATES. ESTABLISHED AS AN INDIAN SUBSIDIARY OF MACMILLAN (H OLDINGS)LTD, IN 1979, THE COMPANY HAD EVOLVED OVER ITS FORTY FIVE Y EAR HISTORY TO BECOME ONE OF THE MOST EXPERIENCED AND DOMINANT PLA YERS IN THE PUBLISHING SERVICES OUTSOURCING SPACE. ' 9.2 WE FIND THAT THE LD. TPO HOWEVER DID NOT APPRECIAT E THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THIS COMPARABLE IS FUNCT IONALLY COMPARABLE WITH THAT OF THE ASSESSEE IN ITES SEGMENT. THE LD. DRP O N PERUSAL OF THE ANNUAL REPORT OF THE MPS OBSERVED THAT THE SAID COMPARABLE OPERATES IN ONLY ONE SEGMENT OF PROVIDING PUBLISHING SOLUTIONS AND IT DO ES NOT SELL ANY SOFTWARE BASED SERVICES TO ITS CUSTOMERS. THE LD. DRP FURTHE R OBSERVED THAT SOFTWARE FORMS PART OF ITS INTANGIBLE ASSETS AND IT IS MORE OF A TOOL TO OFFER ITES TO CUSTOMERS. 9.3 FROM THE PERUSAL OF THE ANNUAL REPORT FOR THE YEAR ENDED 31/03/2014 OF THE SAID COMPARABLE, WE FIND FROM PAGE 707 OF THE P APER BOOK THAT THE SAID COMPARABLE HAD INCURRED OUTSOURCING COST OF RS. 107 8.76 CRORES WHICH IS INCLUDED UNDER THE HEAD 'MISCELLANEOUS EXPENSES' WH ICH GOES TO PROVE THAT IT HAS GOT A DIFFERENT BUSINESS MODEL. FROM THE VAR IOUS FUNCTIONS PERFORMED BY MPS LTD., WE FIND THAT THE SAID COMPARABLE IS PR EDOMINANTLY IN THE BUSINESS OF DIGITAL PUBLISHING WHICH CANNOT BE TREA TED AT PAR WITH ITES WHICH IS THE CASE OF THE ASSESSEE IN ITES SEGMENT. IN THIS REGARD, WE FIND MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 15 THAT THE RELIANCE PLACED BY THE LD. AR ON THE CO-OR DINATE BENCH DECISION OF BANGALORE TRIBUNAL IN THE CASE OF GOOGLE (INDIA) (P). LTD., V. DY DCIT [2013] 29 TAXMANN.COM 412/55 SOT 489 IS WELL FOUNDE D WHEREIN IT WAS HELD AS UNDER: '16. AS FAR AS (4) APEX KNOWLEDGE SOLUTIONS PVT. LT D., IS CONCERNED, WE FIND THAT THE ASSESSEE HAD TAKEN OBJECTIONS BEFORE THE TPO THAT IT IS FUNCTIONALLY DIFFERENT, AS IT IS PROVIDES SERVICES SUCH AS E-PUBLISHING KNOWLEDGE BASED SERVICES ETC. BUT TPO HAS REJECTED THE OBJECTION ON THE GROUND THE ASSESSEE HAS NOT CONSIDERED THE VERT ICALS OR FUNCTIONAL LINES DURING THE SEARCH PROCESS CONDUCTED BY IT AND , THEREFORE, IT IS NOT PROPER TO MAKE ANY OBJECTION ON THIS BASIS NOW. WE ARE NOT ABLE TO AGREE WITH THE FINDING OF THE TPO AS CONFIRMED B Y THE DRP ON THIS ISSUE. MERELY BECAUSE, THE ASSESSEE ITSELF HAS NOT CONSIDERED THE SAID FILTER WHILE MAKING ITS TP STUDY; IT CANNOT BE SAID THAT IT CANNOT RAISE SUCH AN OBJECTION BEFORE THE TPO. IT IS THE TPO WHO HAS ADOPTED THIS COMPANY AS COMPARABLE. ON SUCH ADOPTION, THE ASSESS EE HAS EVERY RIGHT TO RAISE THE OBJECTIONS AS REGARDS THE FUNCTI ONAL DIFFERENCES BETWEEN THE ASSESSEE AND COMPARABLE. IT IS THE BOUN DEN DUTY OF THE TPO TO CONSIDER THE SAID OBJECTIONS IN ACCORDANCE W ITH LAW. AS BROUGHT OUT BY THE ASSESSEE, THE ASSESSEE IS IN THE TT ENABLED SERVICES, WHEREAS THE SAID COMPANY APEX KNOWLEDGE S ALUTATION PVT. LTD., IS IN THE BUSINESS OF E-PUBLISHING WHICH CANN OT BE SAID TO BE IN THE SAME LINE OF BUSINESS. THE FUNCTIONAL DIFFERENC ES ARE LIKELY TO AFFECT THE PROFIT MARKING CAPACITY OF BOTH THE COMP ANIES. IN VIEW OF THE SAME, WE ARE OF THE OPINION THAT THIS COMPANY I S ALSO TO BE EXCLUDED FROM THE LIST OF COMPARABLES.' 9.3.1 IN VIEW OF THE ABOVE, WE HOLD THAT THE COMPARABLE CHOSEN BY THE LD. TPO, M/S. MPS LTD., IS FUNCTIONALLY NOT COMPARABLE WITH THAT OF THE ASSESSEE AND ACCORDINGLY, WE DIRECT THE LD. TPO TO EXCLUDE T HE SAME FROM THE LIST OF COMPARABLES . 15. IN VIEW OF THE AFORESAID DISCUSSIONS, WE ARE OF TH E VIEW THAT MPS LIMITED IS NOT COMPARABLE WITH THE ASSESSEE-COMPANY , WHICH IS ADMITTEDLY ENGAGED IN LOW END SUPPORT SERVICES. RES ULTANTLY, WE DIRECT THE TPO/AO TO INCLUDE THE CALIBER POINT AND EXCLUDE MPS LIMITED FROM FINAL SET OF COMPARABLE AND RECOMPUTE THE ALP OF IN TERNATIONAL MAERSK GLOBAL SERVICE CENTRES INDIA PVT. LTD 16 TRANSACTION WITH REGARD TO IT ENABLED SERVICES; DAT A PROCESS SERVICES AND BUSINESS PROCESS OUTSOURCE SERVICES. 16. THE LD. AR FOR THE ASSESSEE HAS NEITHER PRESSED ANY OTHER GROUNDS OF APPEAL NOR MADE ANY SUBMISSIONS THEREFORE, ALL OTHE R GROUNDS OF APPEAL ARE TREATED AS NOT PRESSED AND DISMISSED AS SUCH BE ING NOT PRESSED. 17. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05-02-2 020. SD/- SD/- (R.C. SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIALMEMBER MUMBAI, DT : 05 TH FEBRUARY, 2019 SK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI